Tag Archives: Silicon Valley

When startups were anything but sexy

end construction2Today little is spoken of the lost years from early 2002 to late 2005 in San Francisco. The years when the SOMA high-rises, now renting at record highs, stood half-constructed as a constant reminder of our paralyzed growth.  The years when nearly all my friends had been laid off, some two or three times. When company culture didn’t mean squat and you just needed to shut up and be thankful you had a job.  When working for a startup was anything but glamorous and not something I bragged about at parties.

More than decade has passed since the bust of 2001 and the ecosystem is again overflowing, this time with a new breed of starry-eyed brogrammers and wantrepreneurs in search of the “startup lifestyle“. I’m told how this era is completely different, often coupled dismissive comments like, “Shipping dog food? Um, duh!”  As if the reasons for the near-decimation of an entire ecosystem can be summed up in a sentence or two. If you weren’t in the Bay Area on the front lines, it’s nearly impossible to comprehend the depth of psychological and economic depression that lay heavy in the Valley for years.  

On August 15, 2000, the startup I worked for laid off 75% of our staff with no notice or severance. I was one of the lucky ones who survived. That is, if by “lucky” you mean shoveling carnage while trying to keep a wounded crew marching forward.  I wouldn’t want to relive it, but I wouldn’t trade it either.  I learned more in those 6 years than most learn in 20 – an experience worthy of its own blog post someday.  In 2004, deep in the bowels of the dark times, I was ready to move on. Craigslist, Monster and Hotjobs had exactly zero job listings for “supersparkle startup generalist” and the thought a corporate gig made my chest seize.  So I went back to school. (Yeah, an MBA, suck it.)

All Hail Web 2.0

Sometime in late 2005, startups started peeking out from the shadows and tiptoeing into the light of the newly christened Web 2.0. The Valley heralded the return with due caution.  Our wounds may have healed, but the scars remained as a reminder to temper our exuberance.  And one magical day in March 2006, just as I feared my pursuit of higher education had been the most horrifically expensive mistake of my life, there it was. Buried among the Haas career site’s endless listing of MBA-jobs-not-for-me was a little 5 person startup in Palo Alto named EchoSign (now Adobe), the perfect home for my sparkling startup superstarness to blossom and thrive.

The Haas career site job listing that led me to EchoSign's revolutionary product and amazing team.

Job listing that led me to EchoSign’s revolutionary product, amazing team, and brilliant cofounder.

Now it’s 2013 and there are signs that the frenzy and exuberance of the past few years have come to bear. So what will happen this time? Could the fallout impact the economy and our collective spirits with the merciless force of 2001? Or will this be a kinder, gentler 2008ish “market correction”?

I will wager only one thing: we the survivors of Web 1.0 stand steadfast at attention. Should nuclear winter come again, our bunkers are stocked with the armor of defensive fund-raising and conservative spending, replete with ample ammunition of innovative products and the artillery to execute.

bunker

About me
gretchendeknikkerA startup junkie to the core, I’ve been launching and growing enterprise SaaS startups and platforms since way back in the last century.  I am the Cofounder & CMO of SocialPandas,  a social selling platform for B2B sales teams. Previously I launched LivePerson’s (LPSNApps Marketplace platform and was an early employee at Genius.com and EchoSign (acquired by Adobe). I love bacon, bourbon, hip hop and all things tech and hold an MBA from UC Berkeley (for which I am still not sorry).

Don’t Call It a Pivot, We’ve Been Here For Years

The following is a guest post by Mark Trang, CEO and Cofounder of SocialPandas.

marktrang

Don’t call it a comeback, I been here for years
Rockin my peers and puttin suckas in fear

– LL Cool J, “I’m Gonna Knock You Out

Why businesses buy technology solutions (especially enterprise software) hasn’t fundamentally changed in our industry. Sure, there are more servers in the cloud, more SaaS subscriptions, and more smartphones in the workplace, but when you strip away all the technology advances and pricing models, the universal need of all businesses to grow revenue and manage costs remains unchanged.

So why has there so much attention around the “comeback” of enterprise-focused companies the past few months?

The enterprise space hasn’t gotten any sexier; the consumer web space simply became less sexy. Maybe even ugly.

This consumer web “un-sexiness” was led by the fall from grace of a number of high-profile companies like Facebook (when it didn’t achieve it’s stratospheric IPO goals), Groupon, Zynga, and others. The previously invincible “So-Lo-Mo” tagline of many B2C companies has become Not-So-Hot. And the “traction” bar required for follow-on funding (e.g. Series A, Series B) has been raised for consumer web companies.

Modern media (including Silicon Valley media) and financial markets (including startup investors) abhor a vacuum and have compensated with more attention and investment in more favorable markets, specifically the enterprise category. Even the talent pool of startup engineers and designers is also reflecting this shift of sentiment; I’ve recently spoken to dozens of candidates that are now open to roles at enterprise-focused companies like ours because their consumer web companies have hit a wall. These same folks would have shunned us 6-12 months ago in favor of founding/joining a pick-your-flavor-of-consumer-web startup. This phenomenon isn’t necessarily because these candidates love enterprise software but because they are now skeptical of ad-supported and e-commerce business models; they simply covet greener grass.

This field of greener grass has been shaped by a list of top performing 2012 IPOs led by B2B-focused companies including Workday, ServiceNow, Palo Alto Networks, Eloqua, and Splunk. 2013 is shaping up to be no different as many B2B leaders are all on the path to an IPO. The result? Early-stage investors are shifting their energy to enterprise-focused startups. Some have been investing in enterprise startups all along; others are now compensating (read: pivoting) for being overweight on too many struggling consumer web companies. This is causing a chain reaction where some startup teams are focusing on/pivoting towards the enterprise space to avoid the taint of “being a consumer web company” and has a secondary effect of a frothy rise in enterprise startup valuations.

What makes enterprise so different and seemingly resilient when compared to the consumer web world? I’d argue….nothing extraordinary.

The Business of Helping Businesses

abacus

Abacus: first enterprise mobile device

Believe it or not, Apple didn’t invent the first enterprise mobile device and Excel wasn’t the first spreadsheet tool.

Many people forget that enterprise-focused tech companies of today have been doing what thousands of others have been doing for thousands of years: delivering tools and services to help other companies grow faster, cut costs, keep customers happy, and ultimately outperform competitors. Nothing special, right?

In fact, the business of providing tools and infrastructure for businesses is as old as the concept of business itself; in some cases, those supplying the proverbial “picks and shovels” in support of new industries end up as successful as the companies they sell to.

tablet

Economic tablet: first accounting app

The earliest business “apps” date back thousands of years to support the most basic of business functions: accounting. Whether it was was counting crop yields or livestock, the practice of keeping track of stuff for business purposes exists today in the form of databases and ERP applications. In fact, many of the largest software companies in the world provide some form of accounting functionality. Coincidence?

So if enterprise apps have such a long history, how and when did consumer-oriented businesses become en vogue?

Who’s B2C’s Daddy?

walmartblackfriday

Trade and commerce has been the foundation of modern civilization. Societies specialized in the production/distribution of certain goods/services which were traded with neighboring societies.

Over the past century, a shift from agrarian/industrial to information economies occurred in most of today’s first-world countries. Fewer and fewer people were tending fields and working in factories. Instead they joined the “white-collar” ranks of today’s information workers. This shift allowed for more people than ever to have both the increased time and income to enjoy discretionary goods/services, giving rise to the world of mass consumerism. Much of this shift was made possible by workplace automation which led to higher labor productivity. Only then did advertising and ad-supported business models (e.g. TV, radio, newspapers) become necessary, possible, and commonplace. Modern day ad-supported and e-commerce consumer web apps are an evolution of this. Because more people have more time than ever to be consumers, a whole host of products and services sprouted up around them to capture their time and money. And in the past decade, the internet has become the ultimate place where consumers could do both.

In a world where we are brainwashed as individual consumers to embrace things that are entertaining and trendy, we favor tales of overnight winner-take-all success vs. stories of ordinary accomplishments. We are addicted to home runs, not high on-base percentages. We celebrate the feeling of hitting the Powerball jackpot, not achieving modest but consistent returns from a mutual fund. We’ve been trained to be lean hackers, not pursue the longer conventional path.

So perhaps it’s not unreasonable to consider the way our preferences and tastes in our personal lives and modern popular culture are influencing and reinforcing our opinions of startup markets. This may explain why popular media (and frequently the VC community) been enamored with consumer web startups, despite their relative youth (in terms of the history and the actual age of founding teams).

When consumer web startups realize they won’t ever get an Instagram-type exit or can’t explain how they will ever generate revenue, their world starts to look more like Bravo’s “reality-show” version of Silicon Valley than the true story of how Silicon Valley really got it’s name. This isn’t a surprise since unlike Marc Zuckerberg, Robert Noyce never had a Hollywood movie made about him.

Living and working in the heart of this startup community in San Francisco, I’ve overheard many recent grumbles from consumer web entrepreneurs that it’s time for them to “go B2B” (meaning “back-to-business” or “back-to-basics” in their parlance) so they can “get traction” and raise their next round of funding. Their assumption is that pivoting towards the “ordinary” world of enterprise apps is less-risky and therefore easier to get traction/generate revenue. This couldn’t be farther from the truth (which I will cover in a future post).

For many of us in the B2B world, there is no “back-to-anything” since we’ve been here all along. And it’s not a pivot if you’ve always been moving in the same direction.

About Mark
Now CEO and Cofounder of SocialPandas, Mark started his software career as a webmaster at a time when many believed the world would end because of the Y2K bug. More recently, Mark was an early member of Salesforce.com’s platform team where he helped launch the Force.com platform and grow the AppExchange ecosystem. Mark was also VP & GM of Platform Technologies for LivePerson, where he launched and grew their API business. Mark was also an early employee at several SaaS startups and an enterprise software consultant at Deloitte. If there was a Noodle-of-The-Week Club, he’d be their supreme chairman and create a Michelin Star-equivalent rating system of the world’s top ramen joints. Mark holds a BA and MBA from UCLA.